With the passage of Prop 207, the “Smart and Safe Arizona Act,” Arizona has joined a growing list of states that have legalized recreational marijuana for persons age 21 and older.  This follows the 2010 passage of Prop 203, which allowed physicians to prescribe medicinal marijuana to qualifying individuals as a treatment for a variety of diagnosed medical conditions, and the narrow defeat of Prop 205 in 2016, which sought to legalize possession and use of recreational marijuana.

In addition to legalizing the possession and use of recreational marijuana, the Smart and Safe Arizona Act authorizes state and local regulation of recreational marijuana licenses, provides updated guidance regarding employer drug use policies, imposes a 16% excise tax on recreational marijuana products, and allows expungement of marijuana-related offenses.

Adoption of the Smart and Safe Arizona Act raises many questions for businesses – regardless of whether their principals approve of Prop 207’s passage – including about company drug use policies, drug testing, medical marijuana disability discrimination claims, and immigration issues and related employee education.  These topics are addressed below.

Implementation Of The Smart And Safe Arizona Act And Its Effect On The Arizona Medical Marijuana Act (“AMMA”).

Passage of Prop 207 does not eliminate Arizona’s existing medical marijuana program under the AMMA.  Rather, the Smart and Safe Arizona Act adds a separate chapter (Chapter 28.2) to Title 36 of the Arizona Revised Statutes.  While medical marijuana regulatory requirements become, in a sense, optional as adults no longer need a medical marijuana card to purchase marijuana, the medical marijuana program is likely to have significant continued use in light of the 16% sales tax imposed on recreational marijuana products.  Accordingly, many existing dispensaries are expected to opt for dual licensure, allowing the dispensary to market and sell marijuana to both medical and recreational users.

Similar to the AMMA, the Smart and Safe Arizona Act tasks the Arizona Department of Health and Human Services (“ADHS”) with developing rules to design and enforce the state’s new recreational marijuana program.  ADHS will have until April 5, 2021 to create and begin to implement these regulations.  Adding to the regulatory thicket, localities may enact signage and operating hour limitations, in addition to zoning regulations that limit the time, place, and manner of recreational marijuana establishments, subject to certain limitations enumerated in the Smart and Safe Arizona Act.

Marijuana in the Workplace?

Employers and employees alike may wonder whether marijuana will now be allowed in the workplace.  While it is up to the Arizona Department of Health and Human Services to develop rules to regulate the new recreational marijuana industry, the proposed Arizona Revised Statutes expressly provides that the Chapter does not:

1. “[r]estrict the rights of employers to maintain a drug-and-alcohol-free workplace or affect the ability of employers to have workplace policies restricting the use of marijuana by employees or prospective employees.”
2. “[r]equire an employer to allow or accommodate the use, consumption, possession, transfer, display, transportation, sale or cultivation of marijuana in a place of employment.”
3. “[r]estrict the rights of employers . . . to prohibit or regulate conduct otherwise allowed by this chapter when such conduct occurs on or in their properties.”

See A.R.S. §§ 36-2852(1), (2), (6). Put simply, employers still retain the right to implement workplace policies that restrict the use of marijuana.

Of important note for federal contractors and parties receiving grant money from a Federal agency, the Drug Free Workplace Act of 1988’s precondition on a drug-free workplace continues to, on its face, include marijuana in light of federal law continuing to prohibit use the drug’s recreational use and the U.S. Constitution’s Supremacy Clause.

Drug Testing in Light of Prop 207, the Drug Testing of Employees Act (“DTEA”), and the AMMA.

Despite the seemingly explicit grant of power to employers under Arizona Revised Statute § 36-2851, there remain many questions regarding restrictive workplace drug policies under the DTEA and AMMA.

The DTEA provides: “[a]n employer may take adverse employment action based on a positive drug test . . .” A.R.S. § 23-493.05.  This section goes on to state that should a positive drug test, or an unwillingness to submit to a drug test, violate an employer’s written policy, the employer may use such violation as a basis for employee discipline, including refusal to hire a prospective employee and termination of an existing employee.  Id.  The DTEA proceeds to restrict claims against employers for disciplinary actions taken based on a good faith belief that an employee used, possessed, or was impaired by any drug while on the employer’s premises or during work hours. See A.R.S. § 23-493.06(A)(1), (5), (6).  For protection under these safe harbor provisions, the employer must have an established policy and testing program that complies with the DTEA.  See A.R.S. § 23-493.06(A); see also generally A.R.S. § 23-493.04.

Notably, the AMMA prohibits an employer from discriminating against a person based on either: (1) his/her status as a medical marijuana cardholder; or (2) a registered cardholder’s positive drug test for marijuana components or metabolites, unless the patient used, possessed or was impaired by marijuana on the premises of the place of employment or during the hours of employment.  See A.R.S. § 36-2813(B)(1)-(2).  Arizona Revised Statute § 36-2813(B)(2) makes available a defense to employers when the conditional language (“unless the patient used, possessed or was impaired by marijuana on the premises of the place of employment or during the hours of employment”) is met.  This defense, when applicable, appears to overlap with the DTEA safe harbor provisions mentioned above.  Nevertheless, under the AMMA, a registered medical marijuana cardholder may not be deemed to be under the influence of marijuana exclusively because of the presence of marijuana components or metabolites that “appear in insufficient concentration to cause impairment.” A.R.S. § 36-2814(A)(3).

There remain many open questions regarding the interaction of the DTEA and AMMA, whether the Arizona legislature improperly amended the AMMA, and given the current application of the DTEA, what is the best way to invoke the DTEA to limit claims made under the AMMA.  An in-depth discussion of these issues is outside the scope of this article.

Mitigating Liability For Medical Marijuana-Related Disability Discrimination. 

Employers should also seek legal counsel regarding whether their drug and alcohol policies, as well as the associated testing policies, are properly crafted to avoid liability for discrimination claims under, among other laws, the Arizona Civil Rights Act (“ACRA”).  Employees with medical marijuana licenses have brought claims under the ACRA under an array of legal theories, including for discrimination based on an actual, underlying disability, as well as claims for discrimination based on a perceived disability (a “regarded-as” disability).

These claims, when taken together, highlight how employers should continue to be cognizant of whether an employee’s underlying medical condition is protected under state and/or federal discrimination law.  Specifically, employers should take care to ensure employment decisions made on the basis of a company drug policy violation do not appear to be made based on the underlying health condition that use of medical marijuana is intended to treat.

Immigration Consequences.

Despite Arizona’s legalization of recreational marijuana at the state level, marijuana remains a Schedule 1 drug under federal law, and federal law controls for immigration purposes.  This reality can have significant impacts on employers who are dependent on non-citizen employees.  Such employers should consider educating employees on the potential consequences of engaging in marijuana usage despite its legality at the Arizona state level.

Employer Takeaways.

Passage of the Smart and Safe Arizona Act will likely have a significant impact on the social and economic fabric of Arizona.  As time passes and recreational marijuana usage becomes more normalized, employers will likely confront marijuana-issues with increasing frequency.  While the post-Prop 207 legal regime does not appear to generate a significant, immediate change for employers in terms of their policies on marijuana possession, usage, and/or impairment, implementation of these policies is still fraught with risk in light of the patchwork of federal and state-level marijuana-related statutes and the relatively underdeveloped area of corresponding common law.

It is important for business leaders to mitigate their risk and protect their businesses by engaging knowledgeable legal counsel to, among other things, evaluate workplace drug and alcohol policies and related testing and enforcement guidelines, as well as counsel on best practices to avoid medical marijuana-based discrimination claims.

DISCLAIMER: This article is designed for general information only.  The information presented herein does not constitute legal advice or the formation of a lawyer/client relationship.